An effective BEE implementation needs a strong legal framework
Paul Janisch of Caird, a BEE-compliance consultancy have spent the last year analysing the codes from a legal perspective and are firmly of the opinion that a successful BEE implementation should be backed with the necessary legal support. I am mildly amused at the notion that a lawyer is generally only consulted when it comes to drafting of shareholder's agreements or assessing the viability of potential BEE partnerships. “What most people don’t realise is that the codes are made up of a series of contractual relationships between the company and its staff, the company and its suppliers etc. And these contractual relationships should be committed to writing to protect all the parties concerned.”
The board and employment equity
As an example when inviting strategic individuals to sit on a company board, whether in an executive or a non-executive capacity, a “Contract of Engagement” should be signed between the company and the individual in question. Often directors are paid emoluments in anticipation of their contribution to the well-being and good governance of a company. An engagement agreement between the parties ensures that the roles and responsibilities are defined and therefore the role and fiduciary duties of that director are communicated upfront and unequivocally, and there is recourse in the event of a breach. Similarly, an employment contract between the company and key BEE staff should be properly managed and annually updated in order to accommodate any changes in the legislation.
Skills development
A vital element of the longevity of our economy and BEE is that of skills development. The codes have set a compliance target of 3% of payroll to be spent on the training of black staff. Whilst most companies are not averse to training staff they are concerned that an employee may leave before the company has benefited from these new skills. The law can protect employers under these circumstances and permits the company to make it a condition that the employee stays within the employ of that company for a finite period after the conclusion of that training. If the employee leaves within this period, they could be obliged to pay the company for a portion of that training.
Preferential procurement
The relationship between a company and its suppliers is a contractual relationship as well. “I have come across contracts that insist that a supplier either meets a certain BEE score within a certain time or requires that the BEE score improves each year.” says Janisch, “In some cases these clauses are material to the contract.” Old contracts should be updated to incorporate this commitment and new suppliers should be properly screened to avoid any potentially negative BEE repercussions.
Enterprise and Supplier development
Janisch believes that an often overlooked aspect of BEE is that of enterprise and supplier development. In some cases it might be necessary to incorporate a water-tight Service Level Agreement to ensure that the relationship stays on track. An example is cited of a company that had gone through the whole enterprise development process and were just not receiving the levels of service that they expected their enterprise development beneficiaries. They then tried to enforce the required levels of service via a SLA. “This might be a little too late to be effective, the SLA should be agreed upon at the outset of the process, making it very clear what will expected from each party.”
I strongly recommend that companies consider professional advice for all these aspects of BEE at the outset. “I encourage people to see contracts as living things. They’re seldom perfect but always fulfil a function and have a place within the ecosystem any business – and as with all ecosystems, it is better to have all role players functioning than not.”